HERE’S A HINT: IT’S NOT YOUR COMPANY.
How many times have you heard startups are hard and companies fail? You know the drill. Think about it: If angel investors were actually buying your company, they would be much more interested in its outcome. But they aren’t.
Sure, angel investors are taking a small option to buy future shares at a discount price—particularly since the vast majority of funding rounds nowadays are made through a convertible note—but in their eyes that’s just a byproduct; a consequence.
From an angel investor standpoint, you’re now competing with hundreds—if not thousands—of other startups. Every single one of them are valued between $3 million and $6 million—and in more rare cases, up to $8 million. Every. Single. One.
Let that sink in for a second. It’s like when you go to the supermarket, and you are surrounded by 20 different brands of cornflakes all priced the same. How do you decide which one to buy? The angel investor is viewing you and your startup as that brand of cornflakes on the shelf. So how do they make a decision? They take the following four things into account:
Angel investors ask themselves the following questions while talking to you about your startup:
- Do I like the product?
- Do I like the team?
- Am I comfortable with the market?
- Does your startup have meaningful traction compared with the other cornflakes beside them?
If you want to maximize your chances of finalizing a positive outcome—or in other words, having them write you a big fat check—you better have a good answer to all those questions. Any angel investor doing their homework can reach any startup through AngelList, and can also collect third-party data on you and your competitor via tools like Mattermark.
STARTUP SUCCESS IS UNPREDICTABLE
So this is how they make their purchase decision, but what are they actually buying from you? Not your company . . . (Read More)
Article by: Armando Biondi
Published at: Fastcompany.com